Home > Encyclopedia of Nursing & Allied Health > Medicaid

Definition

Medicaid is a federal-state entitlement program for low-income citizens of the United States. The Medicaid program is part of Title XIX of the Social Security Act that became law in 1965. Medicaid offers federal matching funds to states for costs incurred in paying healthcare providers for serving covered individuals. State participation

is voluntary, but since 1982 all 50 states have chosen to participate in Medicaid.

Description

Medicaid benefits

Medicaid benefits cover basic health care and long-term care services for eligible persons. About 59% of Medicaid spending covers hospital and other acute care services. The remaining 41% pays for nursing home and long-term care.

States that choose to participate in Medicaid must offer the following basic services:

• hospital care, both inpatient and outpatient
• nursing home care
• physicians' services
• laboratory and diagnostic x-ray services
• immunizations and other screening, diagnostic, and treatment services for children
• family planning
• health center and rural health clinic services
• nurse midwife and nurse practitioner services
• ting states may offer the following optional services and receive federal matching funds for them:
• prescription medications
• institutional care for the mentally retarded
• home-or community-based care for the elderly, including case management
• personal care for the disabled
• dental and vision care for eligible adults

Because the participating states are allowed to design their own benefits packages as long as they meet federal minimum requirements, Medicaid benefits vary considerably from state to state. About half of all Medicaid spending covers groups of people and services above the federal minimum.

Eligibility for Medicaid

Medicaid covers three major groups of low-income Americans:

• Parents and children. In 1997 Medicaid covered 21 million low-income children—one-fifth of all children in the United States—and 8.6 million low-income adults in families with children. Most of these low-income adults are women.
• The elderly. In 1997 Medicaid covered 4 million adults over the age of 65. Medicaid is the largest single purchaser of long-term and nursing home care in the United States. In 1997, Medicaid paid for 38% of the $115 billion spent on long-term care and 47% of the $83 billion spent on nursing home care.
• The disabled. About 17% of Medicaid recipients are blind or disabled. Most of these are eligible for Medicaid because they receive assistance through the Supplemental Security Income (SSI) program.

All Medicaid recipients must have incomes and resources below specified eligibility levels. These levels vary from state to state depending on the local cost of living and other factors. For example, in 1999 the federal poverty level (FPL) was determined to be $13,880 for a family of three on the mainland of the United States, but $15,970 in Hawaii and $17,360 in Alaska.

In most cases, persons must be citizens of the United States to be eligible for Medicaid, although legal immigrants may qualify in some circumstances depending on their date of entry. Illegal aliens are not eligible for Medicaid except for emergency care.

A person must fit into an eligibility category to receive Medicaid even if their income is low. Childless couples and single childless adults who are not disabled or elderly are not eligible for Medicaid.

Medicaid costs

Medicaid is by far the government's most expensive general welfare program. In 1966, Medicaid accounted for 1.4% of the federal budget, but by 2001 its share had risen to nearly 9%. Combined federal and state spending for Medicaid takes nearly 20 cents of every tax dollar. The federal government covers about 57% of Medicaid's costs, with the states paying for the remaining 43%.

As of 2001, Medicaid's costs rise at an average annual rate of 7.9%. The federal government spent $107 billion on Medicaid in fiscal year (FY) 1999, a sum that is expected to rise to $159 billion in 2004. The states spent $81 billion to cover Medicaid costs in FY 1999. These costs are projected to increase to $120 billion by FY 2004.

Although 50% of all Medicaid beneficiaries are children, most of the money (72%) goes for services for the elderly and disabled. The single largest portion of Medicaid money pays for long-term care for the elderly. Only 17% of Medicaid funds are spent on services for children.

There are several factors involved in the steep rise of Medicaid costs:

• The rise in the number of eligible individuals. As the life span of most Americans continues to increase, the number of elderly individuals eligible for Medicaid also rises. The fastest-growing age group in the United States is people over 85.
• The price of medical and long-term care. Advances in medical technology, including expensive diagnostic imaging, keep these costs high.
• The increased use of services covered by Medicaid.• The expansion of state coverage from the minimum benefits package to include optional groups and optional services.

Viewpoints

The need to contain Medicaid costs is considered one of the most problematic policy issues that legislators will face in the coming years. In addition, the complexity of the Medicaid system, its vulnerability to billing fraud and other abuses, the confusing variety in the benefits packages available in different states, and the time-consuming paperwork are other problems that disturb taxpayers and legislators alike.

Professional implications

Medicaid has increased the demand for health care services in the United States without greatly improving the quality of health care for low-income Americans. On the one hand, Medicaid's position as the largest health insurer in the United States means that it affects the employment of several hundred thousand health care workers. In 1997, Medicaid payments went to over 5,000 hospitals, 3,000 nursing homes, 7,000 homes for the mentally retarded, 670 community health clinics, and 550 managed care plans— all of which provide employment for thousands of health care providers, administrators, and support staff. On the other hand, participation in Medicaid is optional for physicians and nursing homes. Many do not participate in the program because the reimbursement rates are low. As a result, many low-income people who are dependent on Medicaid must go to over-crowded facilities where they often receive substandard health care.

---

KEY TERMS

---

Categorically needy—A term that describes certain groups of Medicaid recipients who qualify for the basic mandatory package of Medicaid benefits. There are categorically needy groups that states participating in Medicaid are required to cover, and others that the states have the option to cover.

DHHS—The Department of Health and Human Service. It is a federal agency that distributes funds for Medicaid.

Entitlement—A program that creates a legal obligation on the federal government to any person, business, or government entity that meets the legally defined criteria. Medicaid is an entitlement both for eligible individuals and for the states that decide to participate in it.

Federal poverty level (FPL)—The federal government's definition of poverty used as the reference point for Medicaid eligibility for certain groups of beneficiaries. The FPL is adjusted every year to allow for inflation.

HCFA—Health Care Financing Administration. A federal agency that provides guidelines for the Medicaid program.

Medically needy—A term that describes a group whose coverage is optional with the states because of high medical expenses. These persons meet Medicaid's category requirements (they are children or parents or elderly or disabled) but their income is too high to qualify them for "categorically needy" coverage.

Supplemental Security Income (SSI)—A federal entitlement program that provides cash assistance to low-income blind, disabled, and elderly people. In most states, people receiving SSI benefits are eligible for Medicaid.

---

Peggy Elaine Browning